US Administration Proposes Cuts to Farm Subsidies, Food Stamps, and Overseas Aid

1 June 2017

The US Administration has proposed deep cuts to farm subsidies, along with domestic and international food aid, as part of its larger budget proposal published late last month.

While farm organisations have publicly disagreed with the suggested cuts, other groups have criticised reductions in both domestic and international food aid. The budget proposal, along with covering farm subsidies, also covers a host of other topics, including public education, environmental protection, and health-related entitlements such as Medicaid.

Although the responsibility for writing the US budget lies with Congress, the proposals from the White House are designed to send a signal of the Administration’s political priorities, and are the first step in a long legislative process. US President Donald Trump will have to sign the final budget – often a series of appropriations bills – which Congress eventually puts forward, or veto it if the spending plans do not tally with White House priorities.

Congressional representatives and industry groups are also sceptical about the underlying assumptions in the budget on economic growth projections and tax revenues, sources said.

Agriculture committees respond

The Administration’s proposals regarding farm subsidies and nutritional assistance programmes are expected to face pushback from the crucial House Agriculture Committee, which along with the Senate Agriculture Committee is responsible for drafting the next Farm Bill, succeeding the existing 2014-2018 legislation.

US Trade Representative Robert Lighthizer and Agriculture Secretary Sonny Perdue, met with the House committee on 24 May to discuss the Administration’s plans for the agricultural sector.

“Given that agriculture is one of the few areas where the US enjoys a positive balance of trade, we’re eager to work together to continue building on our hard-fought gains,” said House Agriculture Committee chair Michael Conaway in a statement released after the meeting. Conaway is a Republican from the US state of Texas.

Separately, Conaway also released a joint statement with Senate Agriculture Committee chair Pat Roberts, a Kansas Republican, hinting at their own priorities relative to the proposed budget.

“As we debate the budget and the next Farm Bill, we will fight to ensure farmers have a strong safety net so this key segment of our economy can weather current hard times and continue to provide all Americans with safe, affordable food,” they said on 23 May.

“Also, as a part of Farm Bill discussions, we need to take a look at our nutrition assistance programmes to ensure that they are helping the most vulnerable in our society,” they added.

Meanwhile, Debbie Stabenow, the Michigan Democrat who serves as the ranking member on the Senate’s Agriculture Committee, warned at a hearing on 25 May that the proposed cuts from the White House would “make a five-year Farm Bill nearly impossible to pass.”

She also warned that suggested reductions to crop insurance, food stamps, and rural development programmes would hurt smaller communities and towns in American farming states the most. A separate statement released on 30 May raising these concerns has drawn the support of nearly 30 Senate Democrats. It also questioned a separate move at the US Department of Agriculture (USDA) to eliminate the Under Secretary for Rural Development position, though the senators welcomed the creation of an Under Secretary role for trade.

“Both agricultural trade and rural development functions at USDA deserve and require high-level, accountable, and singularly focused leadership to ensure their missions’ success. We do not believe that enhancing agricultural exports has to come with a demotion for the rural development activities,” the Senate Democrat group said.

At the WTO, many countries have argued that trade-distorting farm subsidies can create an unfair competitive advantage for producers that benefit from this spending. (See Bridges Weekly, 24 May 2017, 2 February 2017, and 24 November 2016)

Farm subsidies “hard to justify,” White House says

The White House proposes capping subsidies to farmers with incomes over US$500,000, and limiting “each farmer or entity” to US$40,000 in crop insurance premium subsidies. “It is hard to justify to hardworking taxpayers why the federal government should provide assistance to wealthy farmers with incomes over a half million dollars,” the proposal says.

It states that in 2013 only 2.1 percent of farmers had adjusted gross incomes above the US$500,000 threshold, despite farm incomes being unusually high in that year. The cap on crop insurance premium subsidies will also “reduce the generous federal subsidies that this programme has been providing,” the proposal says.

The White House says that in 2011, 26 farm businesses received more than US$1 million in crop insurance premium subsidies, and that the proposed new limit would have affected 3.9 percent of all participating farms in that year.

Conservation programmes could also be hit by the proposed cuts, as the Trump Administration proposes “eliminating funding” to those schemes that have not “shown positive outcomes.”

The analysis put forward by the White House indicates that the proposed cuts could save US$15 billion over the 2018-22 period. Other cuts to the USDA budget would affect services such as food safety and inspection programmes and rural economic development schemes.

Groups share mixed reactions

Along with the reactions from lawmakers, the budget proposal has also drawn scrutiny from interest groups across the spectrum, from agriculture lobby organisations to environmentalists.

A statement released by the American Farm Bureau Federation was critical of the proposed cuts, with Farm Bureau President Zippy Duvall warning that the reductions “would gut federal crop insurance, one of the nation’s most important farm safety-net programmes.”

Environmental groups also raised concerns over the plans. “If adopted by the Congress, Trump’s budget would increase hunger, reduce farm income, increase rural poverty, make farmworkers less safe, increase farm pollution, and make our food less safe,” said Scott Faber, Vice President of Government Affairs at Environmental Working Group (EWG), in a statement.

Other advocates of farm subsidy reform nonetheless welcomed the proposals.

“The administration’s proposals to terminate the Harvest Price Option programme and to cap crop insurance premium subsidies are grounded in good economic sense,” wrote Vincent Smith, a professor of economics at Montana State University and director of agricultural policy studies at the American Enterprise Institute, in an online commentary.

The Harvest Price Option is a particular type of “revenue insurance policy,” an extra type of coverage that farmers can choose in order to limit risks from unexpectedly low prices.

However, policy analysts also warned that the Administration’s proposals were best seen as an opening gambit in a longer process of shaping policies and establishing priorities.

“You’re not going to get cuts in farm subsidies by an appropriations bill,” said Joe Glauber, Senior Fellow at the International Food Policy Research Institute (IFPRI), in remarks to Bridges. He noted that as the current US Farm Bill applies through the end of the 2018 fiscal year, any successor legislation was most likely to begin taking shape after the end of 2017.

Food aid cuts domestically, abroad

Another US$64 billion would be cut from the domestic food aid programme known as the Supplemental Nutrition Assistance Program (SNAP), which is aimed at ensuring that low-income households in the US can afford to buy food. The scheme is more commonly known as “food stamps” in the United States, and makes up the vast majority of Farm Bill spending.

The Trump Administration says that its reforms aim at targeting SNAP benefits to the neediest households, “and encouraging work among able-bodied adults without dependents.” The cuts would be done partly by reducing eligibility criteria at the federal level, and partly by requiring states to cover more of the costs. The White House says that the latter would “increase state incentives to create economic paths to self-sufficiency.”

However, SNAP already includes a work requirement, which can only be waived in particular cases, such as if that person has a disability, or is a child or senior citizen. The USDA notes that the majority of people receiving food stamps do work, and that those “able-bodied adults without dependents” can only benefit from SNAP for a short period if not working.

The proposed budget also cuts US$1.7 billion in international food aid under the PL 480 Title II programme, which provides in-kind delivery of commodities in emergency situations. The White House argues that food aid delivered under this programme is inefficient, slow, and costly compared to other schemes, such as aid delivered under the International Disaster Assistance (IDA) account. It also argues in favour of other approaches such as cash vouchers to deliver aid more efficiently and effectively in humanitarian crisis situations. Longer-term food security and nutrition programmes would continue to receive support through the Economic Support and Development Fund and the Global Health Fund.

Aid agencies expressed concerns that the proposals could have devastating effects, given famine and severe food crises across various countries in Africa and the Middle East struggling with the combined effects of drought and conflict or post-conflict reconstruction. (See Bridges Weekly, 9 March 2017)

“The net impact would be a huge cut to international food assistance,” said Gawain Kripke, Policy Director at Oxfam America, in remarks to Bridges. A statement from Oxfam also warned that the budget, if enacted, would bring “untold misery” to millions of people around the world.

ICTSD reporting.

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